Sheng Siong supermarket sales ‘unexciting’
Singapore’s Sheng Siong supermarket network has described sales as “unexciting” despite a boost in profits for the last financial year.
Sales from new stores helped boost the listed group’s sales by 5.3 per cent to S$764.4 million (US$543 million) for the year, boosting net profit by 19.3 per cent to $56.8 million.
But in its business outlook for the year ahead, Sheng Siong said it expects Singapore’s economy to grow sluggishly in 2016. Retail sales which “have been generally weak in the last few months” are not expected to improve spectacularly.
“Likewise, sales at supermarkets have not been exciting and the group expects competition in the supermarket industry to remain keen. Consumers are expected to be more cost conscious which may affect the group’s ability to pass on increases in input cost in full to the customers.
“The group is still looking for suitable retail space particularly in areas where the group does not have a presence.”
Selling prices during the last year were mostly stable, the group reported, albeit with some downward bias. Opportunities to improve input costs continued, mainly helped by the global oversupply situation, the weakening of emerging currencies and margin-enhancing initiatives.
“Rental expenses remained at about 2.7 per cent of revenue, despite an overall increase of $1 million in rent compared with the previous financial year, mainly because of the new stores.”
Cash generated before working capital changes and payment of tax amounted to $79.9 million, in line with the improved operating performance.
Capital expenditure of $30.4 million included a progress payment of $18 million for Yishun Junction 9, $8.5 million for fitting out five new stores and renovating existing stores, $2 million to buy IT equipment, and $1.9 million for warehouse plant and machinery.
However, competition for retail space has not abated, and the company says the search for suitable retail stores may be challenging. The group was the successful bidder in a recent tender for a supermarket space in Block 188 Circuit Rd.
The group’s expansion plan may be affected if the rules governing the employment of foreign workers becomes an issue, says the company.
Some of its old stores in matured housing estates have had a drop in same-store sales, and the group may be earmarking these for major refitting, which could mean a month or so of lost sales. The group will nurture the growth of the new stores and strive for more efficiency in the supply chain while driving for a high mix of fresh produce
“We are pleased to be back on track for our store expansion plans with the opening of five new stores,” says CEO Lim Hock Chee. This takes its total to 39 stores.
“After the renovation to Tampines Block 506 and the fitting out of our new store at Yishun Junction 9, we will add at least 25,000 sqft [2323 sqm] of retail space. In line with our commitment to reach out to our potential customers in areas where we do not have presence, we will continue to look for new retail space.”